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Chinese friendship a dilemma for New Zealand

Tracy Watkins, Wellington

In a panelled reception room at the Chinese embassy in Wellington, a young official extends her arm to the banquet table and urges you to eat.

Try it, she insists. This is the best Chinese restaurant in town.

The occasion is a gathering of middle-ranked Chinese leaders, intent on furthering diplomatic ties with New Zealand.

The hostess is the new face of Chinese diplomacy here. Like many of her colleagues, she is young, attractive, smart — and far less inclined to stand on ceremony than her predecessors.

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When the sale of a chain of dairy farms to China's Shanghai Pengxin company sparked a backlash against Chinese direct investment in New Zealand, it was these young "ambassadors" who were knocking on the media's door, wanting to put their government's case.

Six of them crowded into the Fairfax office at Parliament in Wellington one day, briefing papers balanced on their knees as they squeezed themselves into every spare seat. They expressed confusion and frustration at the widespread fear of Chinese money and expertise.

This is the dilemma of China's rising star in the Pacific and New Zealand. Politically, the leaders of the Pacific and China have never been closer. And economically, China's interest in the region is a boon – not just for small nations, which have received hundreds of millions of dollars in no-strings-attached aid and soft loans – but for New Zealand. A free-trade agreement has seen China overtake the United States as New Zealand's second-largest export market, behind Australia.

But China has been forced to make its diplomacy more visible and vocal, to demystify its growing presence in the region and overcome fears of economic domination.

In a paper for Wellington's Centre for Strategic Studies, former diplomat Chris Elder and defence analyst Robert Ayson acknowledge that China's presence in the South Pacific is "now pervasive" and likely to continue to grow.

"While China has diplomatic relations with just eight of the island countries belonging to the Pacific Islands Forum, it already has more diplomats posted in the South Pacific than New Zealand and Australia combined," they write.

But this increased interest and diplomacy in the region has caused friction.

When China's second-ranked leader, Wu Bangguo, visited Fiji recently, he seemingly endorsed the military government of Commodore Frank Bainimarama and took a swipe at the bullying of strong countries over small or weak ones, in an apparent reference to New Zealand and Australian sanctions against the country after the 2006 coup. It coincided with China handing over a $200 million concessional loan for road construction.

New Zealand Foreign Minster Murray McCully is dismissive of the Wu incident and says he was "not particularly concerned" by the comments.

But Michael Powles, a former diplomat and ambassador to China, says the incident ruffled New Zealand and Australian feathers.

"But the Chinese play the [diplomacy] game like other people; they have no intention of trying to interfere in Fiji's affairs, so why not try to make some political capital out of it? It was annoying from our point of view, but there's no question of them trying to protect Bainimarama. It's just that they won't join forces with those who want to cause Bainimarama trouble."

What Wu's visit also highlighted, however, was the wider diplomatic tussle going on in the South Pacific, between the United States and China.

A conga-line of high-ranking officials from both the US and China have visited the region in recent years.

In September, Hillary Clinton became the first US secretary of state to attend the Pacific Islands Forum in the Cook Islands.

Her attendance was interpreted as a response to US fears of being outflanked by China in the region after a decade of American attention being focused elsewhere; in particular, in Afghanistan and Iraq.

Despite Ms Clinton's assurances at the forum that the Pacific was "big enough for all of us", America's recent re-balancing of military forces in the Asia Pacific has been widely read as a containment strategy against China.

Ayson says New Zealand and the wider South Pacific are being courted by both China and the US and "it's a matter of how we play that game skilfully".

"Everybody in the region is walking a tight-rope, because you've got this situation where pretty much everybody's number-one or number-two trading partner is now China, and pretty much everybody is increasing their security relations with the US."

In New Zealand's case, striking that balance has meant initiating military contacts with China, at the same time as it rapidly escalates defence ties with the US.

Chinese warships have visited New Zealand ports, while US warships still refuse to enter – a hangover from America's decades-old objection to New Zealand's nuclear-free legislation.

But Wellington academic and China expert Marc Lanteigne says for all that America's renewed focus on the Pacific is a response to China's rising influence, "China's overall presence in the Pacific is still very limited".

Lanteigne says that until 2008, China's interest in the region was still largely focused on the bitter turf war with Taiwan over diplomatic recognition.

That turf war played out with Pacific leaders being showered with aid promises and feted with pomp and ceremony in Beijing and Taipei in return for their votes on international bodies.

Powles says it was a source of tension with New Zealand and the Pacific's biggest aid donor, Australia.

"There was a lot of bribery actually, chequebook diplomacy," Powles says. "That's stopped, hopefully for good, not because Australia and New Zealand made a big fuss, which they did, but because relations between China and Taiwan got a whole lot better, with the change of government in Taiwan."

But while the heat has gone out of the issue, the Pacific's 14 votes at bodies such as the UN are still handy to have, Powles says.

"It's quite significant. It means that in the United Nations context, so long as the Pacific Island countries stick together, they are quite formidable. When I was at the UN we used to joke that the Pacific Island countries were stronger and more powerful than the European Union and ASEAN (Association of South East Asian Nations)."

But Powles says the reasons for China seeking greater reach in the Pacific are broader and more opaque than that.

"From China's point of view, the Pacific is very much part of the Asia Pacific region they are in, and have been in for thousands of years, and they expect to play a major role," says Powles. "It's important to them; they want to be treated like a great power. There is a lot of prestige in that, and being treated right is important to China."